World Bank/IMF/EBRD Agenda

The World Bank Supports Russia’s Textbook Revolution....

The World Bank will loan Russia $71 million over the next four years to support the modernization of the country’s flagging educational system. Over $45 million will support curricula reform and governance reform in universities. About $26 million will be provided for the general education where 22 million students participate in a given year. The program was planned in cooperation with the education ministry. World Bank official Mark Agranovitch explained: despite the relatively small size of the loan, the Bank hopes that it will help make big changes in the school textbook market. Over 150 new textbooks will be developed during 4 years.

The competition will be organized in 4 rounds, with 40 textbooks in each round. In the Soviet days there was only one textbook on each subject distributed throughout the entire country. “Our aim is to demonopolize the textbook market that is dominated by two major companies,” he added. At least 10 publishers will participate in the project. Smaller textbook publishers are also encouraged to compete. Russian textbooks were last updated about seven years ago. Russian regions now are responsible for textbook procurement and the Bank will set up a $8 million fund to help them to purchase new textbooks.

....Supports Romania’s Telecom Industry....

The World Bank on April 28 approved a $30 million loan to Romania to promote telecommunications development. Part of the loan will support privatization of the national telecommunications company (Rom Telecom). Up to 30 percent of the shares will be sold to private investors, up to 5 percent to Rom Telecom employees. Another component will assist to upgrade the General Inspectorate of Communications (GIC) into a full fledged regulatory body for the telecom sector. The loan will be at the standard interest rate for LIBOR based single currency loans in US dollars, repayable in 20 years, including a 5year grace period. Since 1990 Bank commitments to Romania total $2.6 billion for 19 projects.

....Land and Real Estate Reform in Moldova....

On April 23 the World Bank approved a $15.9 million equivalent (SDR 11.5 million) credit for a First Cadastre Project to promote the privatization of land and the development of real estate markets in Moldova. The real estate registration system established under this project will provide property owners with the security of ownership rights and will enable commercial banks to give secured credit against real estate. The credit will be on standard IDA terms and will be repayable in 35 years, including a 10 year grace period. Since Moldova joined the World Bank in 1992, Bank/IDA commitments total $277.9 million for 11 projects.

....Economic Development in China

A $63 million World Bank loan and a $22 million Global Environment Facility grant approved on March 26 will support technical assistance and training for a project to increase energy efficiency and associated reductions in the growth of carbon dioxide emissions and other pollutants. A $250 million World Bank loan approved at the same time will help alleviate critical bottlenecks in power transmission infrastructure and increase electricity trade on a commercial basis in the East China region; A $150 million World Bank loan approved on March 31 will support enterprise reform within the state farm system.

IFC Plans to Invest in China Companies

The IFC plans to invest in six Chinese companies this year, marking the most ambitious year of expansion in China for the private-financing wing of the World Bank. Besides the recently announced investment in northeastern China’s Orient Finance Co., the company was also about to conclude a $15 million investment in Minsheng Banking Co., China’s first privately owned bank. That would give IFC 5 percent of Minsheng’s equity, and help Minsheng learn the international standards of disclosure necessary to secure future loans overseas. IFC will also lend Minsheng $100 million, financed through bonds that will be syndicated internationally. By the end of June IFC plans to take a stake in New China Life Insurance and to help set up a joint-venture credit-rating agency with Chengxin, China’s only credit-rating agency. During the second half of the year IFC plans further to buy into Xiamen International Bank, which is China’s first joint-venture bank, and Shanghai City United Bank, the biggest of the city banks being set up across China, most resulting from mergers of credit cooperatives.

Stricter IMF Standard

The International Monetary Fund is to tighten its standards for member countries’ economic data, now that France has dropped its opposition to a requirement for more information on foreign exchange reserves. The IMF’s special data dissemination standard will require countries to publish information on their net foreign exchange reserve position, after also taking sales and purchases in the forward market into account.

Private Sector Advisory Council?

In a letter to the International Monetary Fund’s policymaking Interim Committee, the Institute of International Finance (IIF) proposed that the fund create a Private Sector Advisory Council to facilitate closer cooperation and consultation between the public and private sectors. The global organization of commercial banks, major investment funds, and insurance companies says it’s time the private sector was involved in some of the deliberations of international financial institutions.

Faster Growth in Transition Economies?

Economies in transition (countries of Central and Eastern Europe as well as the newly independent states of Central Asia) will record output growth of 3.4 percent this year, a significant improvement over 1997’s average growth of 2.9 percent, the IMF forecasts in its semiannual World Economic Outlook report, published in April. Inflation for the region as a whole is forecast to average 17 percent a year during 1998. Spillovers from Asia were felt most in Russia, Ukraine, and Estonia. Albania and Bulgaria, after virtual collapses, implemented strong reforms in 1997 and, as a result, saw their imbalances narrow, inflation decline, and growth resume. By contrast, Romania not only delayed its reforms, which contributed to a drop in output last year, but also loosened its monetary policies, and that has led to a resurgence of inflation early this year. Net capital flows, especially from the private sector, are forecast to grow to $35.4 billion this year, jumping to $39.2 billion next year in all the nations in transition. Net official flows are up sharply this year compared to 1997, but even then the total from World Bank, IMF, and other similar sources will account for less than 10 percent of the total capital inflow. By next year repayment of loans will increase to $4.4 billion more than new loan drawings. (Robert Lyle, Radio Free Europe)

Ukraine: Lending Depends On the Pace Of Reform

World Bank lending depends on the pace of reform, and the pace has nearly stopped in Ukraine—the head of the World Bank’s resident office in Ukraine, Edilberto Segura and chief economist John Hansen told a group of international financial journalists visiting Kyiv. Most of the bank’s lending programs are no longer active: a $300 million loan for rehabilitating the Ukrainian coal industry is undisbursed, another $300 million loan for agricultural rebuilding, and a $317 million loan for modernizing the electric power industry are undrawn. Of the $2.2 billion in loans the Bank has committed to Ukraine, Segura says only about $1 billion has actually been released to Kyiv. Foreign direct investment in 1997 still amounted to only $615.6 million. They expressed hopes, however, that Ukraine will get back on the reform track. (Robert Lyle, Radio Free Europe)

IMF Suspends Standby to Ukraine

The IMF suspended disbursement of a standby loan of $585 million to Ukraine after the country exceeded the deficit set in the budget for this year’s first quarter, National Bank of Ukraine international relations head Oleg Rybachuk reported from Kiev. Rybachuk said the deficit had reached 1.4 billion hryvnia in the March quarter compared with the targeted 650 million, and that Ukraine could not return to the framework laid down in the budget in the two months remaining before the end of the standby program. Rather than carry on with the program, Ukraine and the IMF had decided to negotiate an Extended Fund Facility as IMF sources confirmed the EFF will be approximately $2.2 billion, but before the IMF Executive Board would consider the request, the government will have to take fiscal measures both on revenue and expenditure side—measures that will require parliamentary approval.

Scholars Evaluate IMF ESAF

A panel of independent experts has urged the IMF for sharper distinction between policies appropriate for stabilization and policies that are appropriate in an poststabilization environment. In the later, the growth-oriented strategies should be accompanied by increased aid flows. They also urged the Fund to work with the World Bank to identify sectors likely to lose from proposed reforms and to make sure that sufficient social services remained in place to assist them. The report, commissioned by the IMF and released in April, was drafted by four university professors— Kwesi Botchwey of Harvard University, Paul Collier of Oxford University (who, in the meantime, became Director of the Development Research Group of the World Bank), Jan Willem Grunning of The Free University of Amsterdam, and Koichi Hamada of Yale University—who visited eight countries. Their mission was to assess the IMF’s Enhanced Structural Adjustment Facility (ESAF), the mechanism by which the Fund makes low-interest loans to impoverished countries that agree to implement reforms. IMF executive directors said in a statement that they endorsed the fundamental view of the evaluators that while the ESAF was a valuable means of helping low-income countries with balance of payments difficulties, its operation could be improved.

Market Economy Training to North Korean Officials?

North Korea recently delivered its intent to the World Bank, to learn about capitalistic economic operation. A group of European nations, including Sweden, Switzerland, and the Netherlands, have expressed an intention to provide economic aid of $1 million to $1.5 million to North Korea. The UN Development Program will act as fund manager for the education program. The World Bank’s survey mission which recently visited North Korea at Pyongyang’s request. If and when the financial aid is made in the next few months, the World Bank, along with the IMF, will visit Pyongyang officially to provide technical support concerning the country’s economic restructuring. The World Bank cannot make any direct financial aid to North Korea, as the country is not one of its members.

Eastern Europe Faces Infrastructure Funding Gap

A conference in Amsterdam on April 1 drew together multilateral lending institutions, including the World Bank and the EBRD, to address infrastructure funding in Eastern Europe. According to World Bank vice president Johannes Linn the proportion of private finance in infrastructure for all developing countries is expected to fall because of the events in East Asia. Jan Kalff, chairman of ABN Amro, warned the conference that eastern Europe faces the threat of an Asia-style currency crisis if it relies on the foreign private sector to fund big projects. Major lenders told the conference that a massive shortfall in infrastructure funding in emerging eastern Europe must be urgently addressed to help transform the region’s economies. To overcome the problem of declining private finance for infrastructure, Johannes Linn said that European countries needed to reduce risk by establishing a reliable institutional and legal environment, a stable macroeconomic framework, and political trust.

Obliterating Cambodia’s Forests

At current rates of cutting, Cambodia’s forests will be depleted within five years, warned Ngozi OkonjoIweala of the World Bank. The Bank’s recent study into logging in Cambodia has revealed that more than 20 percent of the country’s protected forests are subject to intensive harvesting and about 95 percent of all logging activity is illegal. The authors of the study—the Bank-funded Development Alternatives International—said it had revealed that Cambodia’s remaining forests faced a much greater crisis than previously believed, and that illegal logging had cost the government some $60 million in lost revenue over the past 12 months. Agriculture Minister Tao Seng Hour said he would freeze new concessions as a result of the study.

Extending Networld of IPAnet

IPAnet—the Investment Promotion Network— was created three years ago by the Multilateral Investment Guarantee Agency (MIGA) of the World Bank Website: http://ispace.worldbank.org/cgibin/ frameit.fcg/http://www.ipanet.com. The registration-based service now has more than 6,000 registered users from more than 175 countries. Signing up gives them access to regional and sector-specific resources, news and events, specific investment opportunities, as well as an online directory of international investment organizations and professionals. Through IPAnet, companies can identify relevant investment and project development opportunities worldwide, including specific projects in key sectors such as tourism, hospitality, manufacturing, technology, and pharmaceuticals. Details of infrastructure projects in transportation, power, water, telecommunications, and related sectors are available. MIGA is working with other multilateral organizations on gathering information on specific investment projects in emerging economies. Users can also research legal, policy, and regulatory frameworks in specific countries. The World Bank’s database of 49 competitiveness indicators can also be used to assess economic performance and the environment for competitive business development for a range of countries.

Bosnia Donors’ Conference Redux

International donors met in Brussels on May 78 to discuss more aid for Bosnia, following pledges that postwar economic reforms will continue. Paving the way to the donors conference was a promise by Bosnia’s Moslem-Croat entity to submit legislation to overhaul its pension scheme to ensure that pension obligations will not wreck public finances. Other conditions were progress on economic reforms in the Serb entity of Republika Srpska, better interentity cooperation on public services, and agreement on a countrywide economic and financial program. Out of the $5.1 billion reconstruction program, donors had pledged nearly $3.14 billion as of last December 31. Most generous have been the EU, putting up $673.2 million, and the US with $523.8 million. Japan has pledged $266.7 million, the Netherlands $175 million, Britain $67.2 million, Germany $51.5 million, Spain $38.7 million, Canada $40 million, and France $19.4 million.

Understanding Transition in Central Asia; The Winners Are—Results of the EDI Competition

Citizens of Kazakhstan, Kyrgyzstan, and Uzbekistan participated in the contest for best economic essays under the motto “Understanding the Transition in Central Asia,” organized by the Economic Development Institute (EDI) of the World Bank, together with the Kazakh Retraining Institute, the Retraining Institute of the Kyrgyz State University, and the Tashkent Economics University and partially sponsored by the Dutch-Central Asia Trust Fund and the Swiss Development Cooperation Trust Fund. The studies were evaluated by the Review Committee, an independent jury of acknowledged economists. The winners of the first, second and third prices were awarded $3,000, $2,000, and $1,000. The winning studies in order of first, second, and third place are the following: Kazakhstan: “Attracting Foreign Capital,” by Gulzhan O. Temirzhan; “The Transition to a Market Economy” by Radii M. Fakhretdinov; and, “Forming Economic Relations and Attracting Investments in an Economy in Transition,” by Abai A. Alpamysov. Kyrgyzstan: “Major Prerequisites for the Transition to Market Economy in Kyrgyz Republic,” by Janyl T. Chuburova, “Kyrgyzstan’s Banking Crisis: Problems of Financial Stabilization” by Maya D. Lailieva, and “Seven Problems in the Economic Development of the Kyrgyz Republic during the Transition to Market,” by Murat N. Suyunbaev. Uzbekistan: “Uzbekistan in Transition,” by Aleksandr Y. Kim; “Economic Transition in Uzbekistan,” by Djamshid K. Bakhromov, and “A Country of Contradictions,” by Saidamir A. Atadzhanov.